Canadians brace for tougher 2026 as debt outlook darkens: report

Canadians are bracing for a difficult year ahead, with the majority expecting rising living costs and worsening economic conditions in 2026.

Source: Wikimedia Commons

Canadians are bracing for a difficult year ahead, with the majority expecting rising living costs and worsening economic conditions in 2026, according to a new consumer debt report from insolvency firm MNP Ltd.

MNP’s latest Consumer Debt Index, released Monday, found 71 per cent of Canadians expect the cost of living to rise further this year. Nearly six in 10 respondents said they anticipate a worsening economy (59 per cent), while the same proportion expects housing affordability to deteriorate (59 per cent).

The Consumer Debt Index is based on a quarterly survey measuring Canadians’ self-reported financial stress, expectations, and ability to manage household debt.

“Many Canadians believe that household finances will come under increasing pressure, fueling heightened anxiety about economic security in the year ahead,” said Grant Bazian, president of MNP Ltd. “Canadians expect most aspects of daily life to worsen rather than improve in 2026.”

MNP said Canadians are responding to the pressure in sharply different ways, describing a growing divide between those taking action and those avoiding the issue altogether.

Nearly three in five were described as adopting a “fight mentality,” taking proactive steps such as cutting spending and adjusting their budgets. Some reported attempting to consolidate debt or seeking advice from a financial professional.

By contrast, nearly a third were categorized as showing a “flight response,” including avoiding thinking about their debt, steering clear of financial discussions, or relying on credit to cover essential expenses.

MNP said younger Canadians were significantly more likely to avoid confronting debt pressures, with a small majority of those aged 18 to 34 reporting a flight response.

The report said 64 per cent of Canadians say they desperately need interest rates to go down, while 44 per cent said they worry rising rates could drive them toward bankruptcy.

Despite the pessimism, MNP said some indicators improved. The Consumer Debt Index rose one point from the previous quarter to 87, marking the first time it has increased in December since the index was created.

MNP also found that more than four in ten Canadians said they are within $200 of financial insolvency each month — a decrease from last quarter and the lowest level recorded since the pandemic.

Bazian said relatively few Canadians are seeking professional advice despite heightened anxiety about finances.

“Too many Canadians are trying to navigate financial challenges in isolation,” he said.

The report suggests that even as some Canadians see modest improvements in their personal finances, confidence remains fragile, with affordability pressures and borrowing costs leaving many households with little room for error as they head into 2026.